Im melissa lee. Always good to have you, rebecca. And we start off with the sea of red on wall street major indices all down over a percent ahead of tomorrows fed decision investors seeing a more than 80 the central bank will raise rates another quarter percent. The big banks and regional efts hitting their lowest levels since late 2020. Pac west, western alinls, and comare ka down double digits the oih dropping 6 , lowest close since october, as crude tumbled back to the 70 mark investors blocking to the safety of gold. Both the Precious Metals and the miners offering some refuge amid the volatility the banking crisis not solved, the fed set to hike yet again, and a new xdate for the debt ceiling now just weeks away, not months so, theres a lot going on here, guy. Feels like people just want to be riskier not a trifecta you want to win. Bank of america, whisper of its 52week low. Not trading well and dan mentions it all the time the banks are so vitally important, its interesting, when people dismiss whats been going on over the last month or so, the same people that would tell you the importance of banks when things were going really well the banks are the life blood of this industry and regional and small banks are the life blood of small and midsized businesses, which again with the life blood of this economy so, things are not working out that well. The fact that gold is rallying here should disturb a lot of people and the fact that the bond market once again is showing the volatility that its had r recently is disturbing more to come in the banks . Absolutely because its not just banks now, its insurers, pension funds, mutual funds, theyre all on the table. Today is a disaster for whatever credibility you thought jpmorgan, the largest, best capitalized, best ceo, for what he said yesterday about this stage of the banking crisis, when you look at how it actually spread to money centers, at one point today, i looked down at my screens and i saw wells fargo, citibank and bank of america all down about 4 . Think about that on the back of whats going on in regionals so, if right now, if investors dont have confidence in what jamie dimon has to say and what jpmorgan are doing to stem this banking crisis, that sounds contained, this smacks of what we heard in the spring of 08. Im just telling you that. It doesnt have to be that these banks are in a difficult situation. These are the major money its the perception of what investors think about it and when you think about just the poor performance that weve seen in other parts of the kind of financially oriented, you know, parts of the market, its just not good. The areas that guy just said, and then we kind of extrapolate a little bit, weve been talking about blackstone, weve been talking about the gates that they have up, and the demands that they have for the capital back, this is six months in a row now that theyve actually been over, like right so, to me, i just dont know how any banker can go out and say that this is contained right now, because its clearly not. Down 4 , moves like that arent a big deal, but when you see a pac west and western alliance, trading down 20 , they are trading like theyre the next shoes to drop and that certainly doesnt feel like the banking crisis is over and whether or not its true, perception is everything in this kind of market, especially as the exit, you know, you have the debt ceiling stuff going on, you have the fed raising rates, rebecca. Right so much and the fed today probably had an early look at the latest survey, which is not a dr. Seuss term, a senior bank officer survey, to look at Credit Conditions and lending we got the European Central bank version of that out for the First Quarter today. Im guessing were getting the same message for both, lending slowing, so, the fact that were getting higher rates, another hike likely tomorrow, plus that pulling back the derisking within the banks, to your point, you know, this is trickling through the economy, and the small and mediumsized businesses are going to get hit harder and we havent really felt it yet. This is just through, what, the end of march, the data it doesnt take into account whats going on in april and for sure its going to be tighter. That is mostly true, although we have seen housing slow, thats been months in the making, right . As they the fed was hiking rates, we saw that mortgages became just too expensive for people to buy any homes. So, thats started but we havent seen yet the full effect, and, you know, you can argue, well, the fed should wait, because, lets see, whats the harm i dont think thats going to happen i think, you know, theyll probably hike and i dont know what the language will be, maybe it will be, were open to being ready to pause i dont know that it will be more than that, but i dont today seemed really interesting, they sort of rang the bell your point about perception, particularly for a bank, more than any other company, beth, bat bed, bath and beyond, they are going to go there and buy their towels if it exists, but it wont exist shortly. But a bank is a very different animal i think were going to see this bifur case of Money Center Banks and regionals just continue, and i think i still think that deal for jpmorgan was a fantastic deal, but didnt really seem like they just sort of rang the bell today but i dont understand why yields i dont understand is it a shlowdown that was weighing on yields i dont know im not really sure. Why yields were lower right is it the per fepgs that theyre going to turn and cut . I think its the debt ceiling. Avoiding that tbill issue. Right it might be partly that. I think, you know, the gold move higher today, even bitcoin, if one wants to consider that a safe haven of sorts for certain people, but the move into alternative assets and into safer places to be, defensives the same i saw staples do well today relatively speaking, so, there is a story there in terms of where the capital is going and longterm treasuries, i hear you on the feds not done raising rates, but if you get a decent yield, you get nervous about the exposure you have. Maybe you have some cash, getting 5 risk free, and you have some longer dated yeah, just say this, i had this great conversation with dan ne niles today, and he made a great point. This is not just about the cost of capital and access to credit. What have we seen . Weve seen lots of job cults Morgan Stanley with their second round. When you are done firing people, when youve cut to the bone, what do you do what did aws tell us on thursday from amazon about spending for Cloud Services this is probably when you start to see a pretty meaningful deceleration from one of the largest buyers of all sorts of tech services. And ill just, you know, make the other point, weve also seen a crowding in those names. Microsoft up 10 , 2. 5 trillion market cap so, the more crowding away from some of these perceived problem areas of the market into, lets say, some of these big what you think are safe sort of names, they become very dangerous. And were going to get a look on this as far as aple, they dont have the enterprise exposure, but were going to get nvidia. Thats why we try to put some of these things together a little bit, because i dont think microsofts guidance reflected that amazons guidance did reflect that and maybe they are just a month or two behind. Aple held up pretty well today. Thats been the flight to perceived safety why is that testif. Testify lon Balance Sheet people with wrap their head around the valuation though it happen to think ill effort to answer karens is pause for a second saw a huge move in bond volatility flight to quality, in the form of bonds the debt creeling, and this is not us fear mongering, if i may, Steve Liesman was on squawk box, white house Correspondents Dinner he said somebody approached him, a Senior Member of something, said, you are the network, are not making a big enough deal out of this debt ceiling. Should be a lot more the market should be more worried about it than it is. And i think steve actually agreed with that yeah. Our next guest is bracing for a messy time in this market. Michael shoochumacher, great to have you with us in your note, there was sort of a debt ceiling playbook, where you took a look at what happened, particularly with the bond market in past debt ceiling periods. And you did find that there was a bid for longer duration, correct . So, is that part of what were seeing today i think it is, melissa. And in our view, at least, Janet Yellens note yesterday that, hey, the debt ceiling could be a problem as soon as june 1st, it spooked a lot of people. So, what do they do . They look at what happened in 2011, the really bad case, and say, that was risk off in a big way. S p was down 15 in a couple weeks, treasury yields including the tenyear went way down lets revisit that, lets take risk off the table, lets buy some bonds i think thats whats been going on in the last 24 hours. Its karen, thank you for being on, michael. Do you think any of the economic data, which looked a little bit softer, do you think that we are getting some sense of a recession in the last couple of weeks . It seems like maybe a soft landing is a possibility what do you think is going to happen not there yet, karen. When you look at the data, its turned a little bit, but i suspect well get pretty strong data on friday with respect to the labor market yes, things have weakened, i get that, but in terms of the things that policy makers really focus on, and most reviewers look at, inflation, unemployment, theyre still pretty darn good no really visible sign of recession just yet one thing that ive been struggling with is trying to compare the debt ceiling now with what happened in 2011 2011, we were also in the middle of a european sovereign debt crisis, and so when i think about the move in bond yesterdays in 2011, how much of it was the problems we were facing here at home versus a flight to quality that maybe was global, europeans wanting to get into u. S. Treasuries have you been able toll parse which is which and without europe going on, how big a move could we see in treasuries now do you have any thoughts on that yeah, when you think about 2011, yes, europe was blowing it, italy ten years traded at 7 for awhile but when you look at the historical periods, whether its now versus 2011 or some other time, there is always something different. We had Regional Banking problems today. Didnt really have that in 2011. Im not really sure if that will outweigh it. So, its tough to separate those effects. As far as how much yields could move, could it fall 25 to 50 basis points absolutely, we think it could. Is it super likely maybe not. But that could happen. So, i think its difficult to distill those effects, but thinking about that 80, 90basis point move in 2011, half of that, twothirds of that could that happen again . Yes, we think so when you think about what the fed might do and the path it might take, so, beyond tomorrows decision, does any of this factor in in your mind, michael, or is it just the data, and what you think the fed wants to do . Yeah, the feds in a tough spot, so, the fed now has the debt creeling, which cropped up, its a political event, not something the fed can really influence, yet it does impact fed policy, so, thats one thing. As far as banking troubles, to what degree is the fed maybe a little bit responsible, which is some of the tone that came out of the Silicon Valley assessment, and the huge increase in Interest Rates contributing to that, its tough to say so, the feds not completely a bystander in that case but the feds got a lot of crosswinds to try to assess. In a fullblown banking crisis with a fed hike, that doesnt make a lot of sense. But if the debt ceiling is becoming more intense or perhaps a lot more, would the fed go one more time . I think it probably would. And perhaps signal, hey, weve done a lot inflation is still out of control. Its coming down, but well above our bounds, we want to see it give a bit more time to the rate increases we already have in place. I think thats probably the messaging the fed would like to get across tomorrow. Going to be a tough job. We know the fed has said it doesnt care what the stock market does, and i get that point, but at the same time, when you see how some banks have traded today, i dont know if theres a fullblown banking crisis in reality, but the perception is that there could be one brewing right now which do you think the fed looks at, the perception, because perception, you know, a month ago, was everything when it came to that deposit flight right yeah, the perception can lead to reality, right so, i think the felt has to be aware of both and it can look at Regional Banks down a fair bit today and say, thats kind of worrying, should we be super concerned about that or is that normal volatilvolatility perhaps its a bit more than normal so, i think the fed takes into consideration, does it really count as an enormous crisis right now . Tough to say, probably not, with theless coupe l rescues that hae but i think the fed is weighing that carefully michael, thank you. I dont know, down 28 for a Regional Banking in one day . That seems way out of the bounds of normal volatilvolatility crisis for shareholders, but again, i dont think that should be in the purview of the federal reserve. If stocks go down, thats just what happens yeah, the fed is in a difficult position, that they put themselves in. Its unfortunate, but here they are. And the bank of canada tried to do what they called a hard pause, i dont know what that means, but didnt work out particularly well, so, what does that mean . Well, theyre going to try to navigate this. The gold market, though, if you Pay Attention and you sort of led with, is telling you, you know what . Things are going on. And people might be bullish of gold theyre not long of it yet. Look at the commitment of traders. When those machines get triggered, thats going to be the next move. Given everything we know, and look at its not just banks here, look at the proxies for growth in general, crude is 71 right now, look at the equities. I dont think the fed really cares about the stock market right here they care able out the effects f the economy here the s p is up 7 on the year theyd be happy to have it down a few percent. I totally agree with that the fed is trying to get financial conditions to tighten. Year to date, they havent done that so, while they might not like the speed of this move, the volatility of it and the cause of it, overall, are they going to be concerned the stock markets falling right now not at all it just seems like one of the last pockets of enthusiasm of this period that we had in the postpandemic period if you go out and you buy stocks because you think that it was a dovish hike tomorrow, you are just doing this wrong. And guy said this about 50 times over the last two months or so, the only reason the fed is going to lower Interest Rates right now or any time between now and the end of the year, if we really do have a crisis. And thats not when you want to be buying risk assets. If you look at the s p, trading at 19 times earnings, in this environment, the fed funds at 5 , inflation where it is, if they are to lower Interest Rates, youve been saying this again, then the inflationary stuff that were trying to battle, like, this whole thing is about, like, taking out the regionals, unintended, okay, is just lost, its all for not. And then you have a confidence in institution that doesnt have a whole heck of a lot of credibility over the last few years. Im sorry say the last part again. Youre saying you have confidence and you dont have confidence in the fed . They cut interest if they cut. Understand. Right. Something bad will have happened for sure. I think they are going to be slow to cult whatever the bad thing happens, theyre not going to be out there cutting right away no, theyre trying to by fur kate the first order is going to be, what can we do with regulation, what can we do with special provisions, even temporary qe. Well, that makes sense. Westagflation, that would be a terrible situation for the fed. Hopefully we dont get there, if you talk about, you know, oil coming down, some of the other commodities are coming down, as well i think on our call, you talked about gasoline today coming down a lot. All those are good things. Its what they this was sort of the Collateral Damage they were willing to accept and needed to. They couldnt say, well, were fine with inflation, well just let it go. All right, up next, a huge slate of earnings action still to come. Star starbucks, amd, ceaesars and ford plus chegg gets sliced in hatch. Shares down nearly down 50 just today. How the a. I. 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